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Friday, February 3, 2012

Multiple savings accounts for multiple goals

How many of you have one savings account? Do you also only have one savings goal?

Let’s face it: if you
keep all of your money in one savings account, you may not be efficiently
saving towards your goals. Your savings should be a place where
you have different goals to save up for. With multiple accounts,
you can set aside specific goals that are clearly defined. These
individual accounts will then help you efficiently save more.

Your savings money should be separated from the money you use for
everyday purchases and bill payments. If you keep all of your money
lumped together, you will inadvertently spend your savings along with your
regular spending. If
all of your money is in one place, then you can easily forget how much money
you’re saving for each goal. Your savings accounts should be
regularly funded, not raided for impulsive spending you can’t afford.

I recommend an online savings account to set up your multiple
savings accounts. There are several to choose from but I recommend CIT Bank.

Banking with CIT offers a higher interest rate
than traditional big banks and comes with a lot less fees and stipulations. Traditional big bank savings accounts may require a minimum amount in the
account or else they’ll charge you bank fees. With CIT Bank, you
truly have no minimum balances that you need to maintain. You can
open an online savings account with a $100 minimum deposit and the process only takes a few minutes.

The most important reason I recommend an online bank is that it will set a barrier between you from your savings.
You transfer money from your online bank to your regular bank, but the process
takes 2-3 business days. Hopefully the
separation of you from your savings will make you think twice about immediately
wasting your savings on something frivolous. Also, it’s nice to see
you fill up and reach your multiple savings goals.

These are the nicknames of the accounts that I have with CIT Bank:

Emergency Fund

Property Tax

General savings

Entertainment Fund

Here is one example
of how I optimize a personalized online savings account. I owe $6648 worth of property taxes a
year. This requires me to save $6648/12 = $554 a month. I put this money into my “property tax” account
specifically designed for this savings purpose. When it’s time to pay my
property tax, I don’t hesitate and need to scramble together this large sum of
money. It’s already been purposefully saved up regularly throughout the
year. Without a separate online savings account, I could fool myself into
thinking I have an extra $6648 in my savings account.

Now, I know exactly
how much I have saved up for my different savings goals.

Opening your online savings account will take you less than 10
minutes. Simply go to CIT Bank and then open a
new online savings account.
Once you open your account, you can easily open additional savings accounts in
less than 10 seconds.

You may have different savings goal from myself, such as: house
down payment, car fund, wedding fund, Christmas gifts, home remodeling, new
furniture, new big screen TV, etc. The point is: these individual accounts will give your
savings both direction and inspiration. After you’ve saved up for
your goal, don’t forget to always pay with credit.